(Reuters) -Retail investors are showing signs of waning confidence in the U.S. stock market's ability to rebound, with market data and analysts' observations both indicating an ebb in their enthusiasm about buying dips.

Individual investors have been an important factor behind this year's market rally, helping it to bounce back from selloffs and powering it to a string of record highs.

But as the market has lurched downwards since the start of this month and pulled back from its recent peaks, investors have shown less propensity to invest on down days, analysts said. 

"Sure, the whole 'buy the dip' mantra still has a lot of support out there on social media channels, but investors are paying more attention to questions about valuations or whether we're in an AI bubble," said James St. Aubin, chief investment officer of Ocean Park Asset Management.

Retail participation in the market has become increasingly important since the COVID-19 outbreak in 2020, when growing numbers of quarantined investors focused on their portfolios.

Over the last two years, market analysts and traders have also pointed repeatedly to buying on dips by retail investors as a major source of resilience whenever the market has hit bumps.

Vanda Research, in reports published this week and at the end of October, said its analysis of trading data suggests that retail investors are no longer demonstrating the high level of conviction that has fueled big market rallies this year, such as the bounce that followed April's "tariff tantrum."

"Cracks are beginning to emerge in this trend," the firm's analysts said in the most recent VandaTrack report, published last Wednesday. The day before that, Vanda said, buying by individual investors was the weakest recorded since May and the third-weakest single day of 2025.

The firm began picking up early warning signals even earlier than that, said Viraj Patel, deputy head of research at Vanda.

Throughout the summer, he watched as individuals began steering more of their buying to more speculative stocks, ranging from uranium mining companies and smaller bitcoin treasury companies to quantum computing stocks and meme stocks.

"The real defensive tell for us came in September, when we saw a pullback in the buying of individual stocks altogether and into broad market ETFs," such as the SPDR S&P 500 Trust or the Invesco QQQ Trust, Patel said. 

Then, late last week, Vanda saw investors begin to scale back their purchases of those exchange-traded funds as well. Traditionally, ETFs have functioned as a kind of safety blanket for investors in times of greater anxiety.

Other firms have spotted the same signs of diminished enthusiasm among retail investors since the beginning of November.

BofA Securities said in a report published Wednesday that while it had seen enthusiastic buying of broad market ETFs in the preceding week, all of that activity had come from institutions. In contrast, individual retail investors "were net sellers for the first time since the end of September."

Some analysts, however, said they were not ready to sound the alarm about retail investor attitudes or behavior.

Trading and asset management platform Charles Schwab ( SCHW ) has detected a slightly higher degree of caution among retail investors, although its proprietary sentiment tracker remains in positive territory, said Joe Mazzola, head of trading and derivatives strategist.

"Retail interest in buying the dip is moderating so far this month, but it is still a factor," he told Reuters.

But analysts remained focused on monitoring retail investor sentiment and the direction in which it may be heading.

"Without their support, any rebound becomes more difficult," said Adam Hetts, head of multi-asset investing at Janus Henderson.